Coupons are the Key to the success of Location-Based Services

Location-based advertising has always been an important tool for local businesses. What started with the guy on the corner with his sandwich board passing out flyers is now giving way to something more technologically advanced. New ideas and platforms such as Foursquare, Gowalla, SCVNGR, and most recently Facebook Places are slowly gaining momentum in the local advertising world. And I mean slowly. While those of us living in tech hotbeds such as New York City or San Francisco may be very aware of the “check-in”, the Pew Research Center’s Internet & American Life project finds that only 4% of online adults in the U.S. use a service that allows them to share their location with friends and to find others who are nearby. So how will these location based companies look to further penetrate the market and expand their user base? The answer is simple. Coupons! Deals! Facebook and Foursquare know that 80% of Americans used coupons in 2009 and saved over $40 billion while doing so. Check-ins might be “cool”, but what makes them mass marketable are the money saving coupons. Money Talks! It’s the oldest direct response marketing tactic, and a the tactic and SMB’s understand the best. We took this is to the streets and talked directly to several merchants. According to Steve Cohen, owner of 2Tasti D-Lite’s in New York, “ We get 1 or 2 new customers every day who visit our store because of that little orange “special” box on the foursquare platform. People are walking around, checking-in at different places around us, and notice that we offer a dollar off to anyone who checks-in at our store. It’s a great customer acquisition tool.”

Location Based Services will become an on-the-go source for finding deals where you are right now. And Facebook obviously agrees, as just this week they announced their deals initiative. Local businesses will now be able to offer their customers deals and coupons, but in order to unlock the deal, the customer must first check-in on Facebook Places the Facebook Mobile App. Even Yelp is getting in the mix. In essence, Facebook and Yelp are offering monetary compensation to motivate users to check-in. We predict that if PEW were to conduct the same study in 6 months, the percentage of people in the U.S who use check-in services would be significantly higher than 4%. Facebook is using coupons to bring the check-in game to the masses.